It isn’t unusual for a family to come up a little short at the end of the month. How a family handles that situation may matter more than you think.
If your family comes up short by $100 every month and borrows that money on a credit card with 12% interest, the deficit in the second month will have grown to $101. The next month, the shortfall will have grown to a bit more than $102. Within a year, the shortfall will be $113. After two year years, $127 and after three years, $143. You’ll also have a new debt totaling $4,308 at the end of 36 months.
If you borrow the money on a more expensive credit card, say one with a 24% interest rate, after three years the monthly deficit will have grown to $204 per month. At the higher interest rate, your debt will have grown to $5,200.